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The Human Resources Institute of New Zealand

Human Resources Institute of New Zealand (HRINZ) is the professional body for those involved in Human Resource Management and the development of people.

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Definition of Redundancy?

Well, the Department of Labour, definition is " Redundancy is a situation where the position of employment of an employee is or will become surplus to the requirements of the Employer's business".

Generally redundancies within an organisation occur when there is a decline in company revenue and/or work available or the company is looking to restructure and streamline the organisation. In these circumstances the employee may find that their position is surplus to the companies requirments or needs. Therefore, the organisation or employer will announce to the employee or employees affected that their contracts are going to be terminated as their positions will no longer exist.

Redundancies have to be for genuine commercial reasons and not for any other underlining reasons such as capability or performance issues.

Currently there are no statutory right to redundancy compensation in New Zealand, unlike other European countries.

Any redundancy provisions will be clearly outlined in your Individual Employment Agreement (IEA) or Collective Agreement (CA) on how your organisation will deal with this situation, if it were to arise and what the redundancy process and compensation package will be.

However, if you do not have a redundancy compensation clause in your employment contract, it still may be in the best interests of the employer to offer a redundancy compensation package to the employee.

Under the ERA, employers need to act in "good faith" which extends to employers consulting with employees about the changes to the business for example:

  • How this affect the employees
  • Informing them clearly what the selection criteria for redundancy will be
  • Giving the employees a "reasonable" notice period if selected
  • Advising them of any assistance or resources the employer is going to offer employees being made redundant ie: redeployment, assistance finding a new role and redundancy pay.

In most cases, the New Zealand Court of Appeal's view has been that 1 month's notice is reasonable, however, rather than requiring the employee to work out the notice period, employers sometimes offer an equivalent amount of remuneration as 'payment in lieu'.

Another factor employers should take into consideration is the effects the redundancies will have on the existing workforce. As downsizing process can sometimes have a negative effect on staff morale, productivity etc as the 'survivors' (those who were not made redundant) may have a different view of the organisation due to their perception of how the redundancy process was carried out? How their employer treated those who lost their jobs?

If employees have the perceived view that the employer or organisation did not treat these employees fairly during the redundancy process, they will consider moving on themselves, as they will believe the organisation will treat them in the same way, down the line.

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Disclaimer: This information has been written for and submitted to HRINZ for publication and has been published in good faith for the general information of HRINZ Members of the Institute. HRINZ accepts no legal responsibility for the contents of the Knowledge Base and appropriate professional advice and assistance should be sought in particular cases.

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